Government firm on fuel price hike

JAKARTA (JP): The government was determined to cut fuel subsidies and raise the price of fuel so that there would be more funds available for promoting the welfare of the poor, Coordinating Minister for Economy Rizal Ramli said.

Rizal said on Saturday evening that the plan to use funds collected from the subsidy cut for the benefit of the poor had gained support from leaders of the House of Representatives.

"One of the important agreements between us and legislators is that if the fuel price is raised, the funds collected from the subsidy cut should be used for grassroots programs," Rizal said after a meeting between the Cabinet's economic team and several House commission heads.

The funds from the subsidy cut would be made available to Minister of Settlement and Infrastructure Erna Witoelar and Minister of Cooperatives and Small/Medium Enterprises Zarkasih Noer to finance their respective programs to promote the welfare of the poor.

"Under Ibu Erna Witoelar, (the fund will be used) for rural infrastructure development, and under Pak Zarkasih Noer for the development of small and medium enterprises," Rizal was quoted by Antara as saying.

Earlier, Minister of Energy and Mineral Resources Purnomo Yusgiantoro indicated that the government would raise fuel prices by 12 percent as agreed upon by the government and the House prior to the aborted plan to raise fuel prices in April this year.

The government's plan to raise fuel prices in April this year was canceled after public protests.

"Actually, I cannot confirm the exact increase in fuel prices or when we will apply it. But we hold on to our earlier agreement with the House to raise fuel prices by an average of 12 percent," Purnomo told reporters on Saturday during an inspection of the Balongan refinery in Indramayu, West Java, which is owned by state oil and gas company Pertamina.

"With an average increase in fuel prices of only 12 percent, the government can only save Rp 800 billion (US$96 million), which will be used for the promotion of the people's welfare," Purnomo said.

He said fuel subsidies were projected at Rp 43.93 trillion in the April-December 2000 fiscal year.

Under the previous scheme, the government sought to protect the poor from the new fuel prices by providing them with cash aid or special coupons to buy fuel at special prices.

In line with this scheme, the National Development Planning Board (Bappenas) planned to provide annual cash aid of Rp 50,000 per family to protect the poor from the fuel price hike.

The cash aid, which would have totaled Rp 870 billion, would have been channeled to 17.4 million poor families considered eligible for the funds.

Purnomo said the government has mulled an alternative to the cash aid and coupon system.

"The (cash aid and coupon) system is immature and confusing. That is why the system is not on the government's mind at present," Purnomo said.

He said the government would continue discussing a better scheme with the House.

He added that the new economic team had agreed to form a campaign team to prepare the public for the fuel price increase and raise awareness of the importance of the new fuel prices.

Head of the House's Commission VIII, which oversees mines and energy affairs, called on the government to involve various parties, including the House, in socializing the fuel price hike.

Fuel prices are always a sensitive issue in the country with rises in prices always leading to public protests and social unrest.

The government last raised fuel prices in May, 1998. The move led to massive public protests and a riot in Jakarta which contributed to the downfall of former president Soeharto that month. (bkm/jsk)